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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Models where firms agree to mutually improve their situation






2. Ed = 0 - no response to price change






3. A good for which higher income increases demand






4. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






5. Total product divided by labor employed. APL = TPL/L






6. Entry of new firms shifts the cost curves for all firms downward






7. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






8. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






9. The lost net benefit to society caused by a movement away from the competitive market equilibrium






10. All firms maximize profit by producing where MR = MC






11. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






12. MUx / Px = MUy/Py or MUx/MUy = Px/Py






13. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






14. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






15. The most desirable alternative given up as the result of a decision






16. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






17. Product demand - productivity - prices of other resources - and complementary resources






18. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






19. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






20. The marginal utility from consumption of more and more of that item falls over time






21. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






22. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






23. Occurs when LRAC is constant over a variety of plant sizes






24. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






25. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






26. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






27. AFC = TFC/Q






28. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






29. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






30. The ability to set the price above the perfectly competitive level






31. The additional cost incurred from the consumption of the next unit of a good or a service






32. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






33. AVC = TVC/Q






34. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






35. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






36. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






37. Two goods are consumer substitutes if they provide essentially the same utility to consumers






38. The practice of selling essentially the same good to different groups of consumers at different prices






39. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






40. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






41. A firm that has market power in the factor market (a wage-setter)






42. Ed = 1






43. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






44. TR = P * Qd






45. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






46. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






47. 0 < Ei < 1






48. Ed = (%dQd)/(%dP). Ignore negative sign






49. The difference between total revenue and total explicit costs






50. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0







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